Investment Habits Reveal Insecurities How You Approach Money Is Linked To Deepest Emotions

May 18, 1988|By Lisa M. Keefe of The Sentinel Staff

Ivan Boesky, the kingpin of Wall Street's biggest insider trading scandal, was driven not by greed, but by the memory of some devastating humiliation and his desire to get revenge.

Howard Hughes used his millions to buy isolation, but more importantly, to buy love and affection. His wealth attracted a succession of starlets, and he married them in an attempt to fill an emotional void in his life.

So says Linda Barbanel, a New York-based psychotherapist who specializes in the psychology of money. How you feel about your money and what you do with it -- including how you invest it -- are inextricably linked to certain psychological traits, say Barbanel and a handful of other financial psychologists. Understanding your feelings about money can help you invest it for a better return, they say.

Good financial planners and stockbrokers use psychology with their clients every day, even if they haven't studied the discipline, because good investment advice comes from understanding what position money holds in an investor's life. ''I don't try to psychoanalyze a client but I do try to get a strong feeling as to what would prevent them from sleeping at night,'' said Alan Selwyn, co-manager of the HL Financial Group, a financial planning firm in Maitland.

Psychologists divide investors into different categories, depending on their age, background and personal experiences, but psychologists differ on what the categories. Generally, investors are either insecure about money and are conservative; use money as a source of self-esteem and tend to buy a lot of material goods; or exercise a great deal of control over money, and use it as a source of excitement. Each type of investor has his strengths and weaknesses, and knowing which category best describes you can help maximize your return.

Investment and financial psychology as a separate discipline has attracted a growing audience in this decade, as the number and sophistication of individual investors has increased. Several psychologists have entered this specialty, counseling financial professionals and individuals on how investors develop financial attitudes and how to use that knowledge to their advantage. The origin of many financial attitudes, these psychologists say, is in the way your parents handled money, or in your own experiences. The classic example is the investor -- or child of an investor -- who lived during the Depression, psychologists say. Kathleen Gurney, a psychologist and president of the Los Angeles-based psychological counseling firm, Financial Psychology Corp., had an older client who kept about a half a million dollars in the bank, but drove a 10-year-old car that was constantly breaking down.

''He was acting like he was in the Depression when it wasn't reasonable at all,'' Gurney said.

Similarly, ''if the parents are tight, that's passed from generation to generation like a torch,'' Barbanel said.

The result? A basically insecure investor who sticks to conservative investments, such as certificates of deposits and government bonds, which provide a lot of security but relatively little return. Most retirees fall in this category, but by no means do they compose the entire group.

Being so cautious is not a bad investment strategy. Gurney has identified a group of investors she has dubbed the ''achievers,'' who are conservative investors, and very wealthy. Other characteristics of achievers: they need structure in their lives, tend to work for corporations and have traditional families; and they spend their money on utilitarian items: buying a Honda, for example, instead of a Jaguar.

Conservative investors see money objectively, but most people project some degree of emotion onto their money. One type of emotional investor sees his earnings and investments as a source of self-esteem. He may also spend a lot on material goods that he shows off to others, and his belongings also become a source of self-esteem. Barbanel said Howard Hughes is part of this group.

Professional women often fall into this category, playing a game of material catch-up to their male counterparts. These women do not accumulate assets, Gurney said, but get greater satisfaction out of spending money.

Barnabel added, ''These investors will compensate with money, making up for whatever emotional deprivations they have felt. Money is a many-splendored thing to these people, and they have the means to buy the kind of treatment they feel they deserve.''

When this type invests money, it's likely to be in blue-chip stocks or some other investment -- say, options -- that will garner them a lot of attention at a cocktail party. But what they really need is a budget, Gurney said.

The last group is composed of investors who are the most wrapped up in their money, who exercise the most control, or project the most emotion onto money. This group includes entrepreneurs, gamblers and control freaks, who may be using money to prove their power. Barbanel places Boesky in this group.